Global Studies

This paper provides an empirical and theoretical analysis of theft from opaque food subsidy schemes in developing economies. Some 48% of the subsidized rice distributed in the Philippines in 2006 does not show up in household surveys. Pilferage is suspected, and we introduce several new robustness tests that rule out alternative interpretations of this …nding. We argue that …finding pilferage in an opaque system does not simply imply that redistribution is costly, as the literature has recognized. It also implies that reducing the amount of product pushed into the distribution system should reduce pilferage one-for-one, and that such reductions and transparency improvements should unambiguously improve consumer and taxpayer welfare. In contrast, reductions in the price subsidy may not be welfare enhancing.